Citizens Financial Group, thanks to the steady work done under chief executive Bruce Van Saun since he took the helm in 2013, is in that select group of banks that have options. In good shape heading into the coronavirus pandemic, it is also emerging from it well.
Little surprise then that it has snapped up 80 east coast branches that HSBC had put on the block as it exits the US retail market. Van Saun liked the look of the deal that PNC Financial Services struck to buy BBVA’s US business in November 2020, telling Euromoney in December that deals like that were bringing inorganic growth into focus. Now he has found his chance to do something similar.
The deal comes with high expectations. Citizens thinks it can earn an internal rate of return of 20% from its acquisition of the branches and HSBC’s online deposits platform nationwide (PNC reckoned on 19% for its BBVA acquisition). The deal adds up to about $9 billion of deposits, for which Citizens is paying a 2% premium, and $2.2 billion of loans.
The impact on core equity tier-1 is minimal at just 24 basis points. The bank’s loan-to-deposit ratio improves from 81% to 78%. And the deal brings Citizens into valuable new markets – New York (where 66 of the new branches are based), Washington DC and southeast Florida. It also adds some 800,000 customers.
About one third of the deposits that Citizens is getting from HSBC are online and will plug neatly into Citizens Access, the national digital bank that Citizens launched in 2018.
Wealth advisory focus
Van Saun has long been pursuing a policy of national expansion. But the story is more than geographic. At the moment he is also looking at it through the lens of wealth management advice for a mass affluent customer base. Some of those thousands of customers the bank is getting from HSBC will be ripe for plugging into Clarfeld Financial Services, the wealth advisory business Citizens bought in 2019.
He talks of the HSBC deal as a “springboard”. And all those deposits also give it useful new lending firepower in its new markets.
Van Saun has a good acquisition track record. Franklin American Mortgage, which he bought in 2018, gave Citizens critical mass in mortgages, which accounted for about 40% of the bank’s non-interest income in 2020, which was the biggest year in US mortgage origination history.
He now calls Franklin the “shining star” in the Citizens portfolio and will be hoping for a similarly successful integration of his latest purchase. Whether in mass-affluent wealth advisory, digital banking or point-of-sale finance, Citizens under Van Saun looks increasingly like it is embracing the zeitgeist.
